By Mutahi Mureithi
One summer day in London, two gentlemen met for tea at The Churchill, one of London’s glitziest five-star hotels that is steeped in a rich tradition of hosting royalty and people of means. The gentlemen were old friends from Kenya and since they happened to be in London at the same time, why not catch up?
Richard Douglas had arrived from Nairobi to attend the graduation of one of his children, from Oxford University. At the same time, his friend Joseph Gachui, then Deputy Secretary in the Ministry of Finance in Jomo Kenyatta’s government, happened to be in London finalising a US$100 million syndicated loan that National Westminster Bank (NatWest) had arranged for Kenya. In the course of their chat, Gachui revealed that NatWest had offered to train a Kenyan in international finance, but that no one immediately came to mind.
Douglas was not a man who saw an opportunity and let it pass. Without hesitation, he mentioned to the highly connected government official that his son, John Ngumi, then 24 years old, had just graduated from Oxford with a first-class honours degree. Could he fit the bill for the NatWest training? And why not, Gachui replied. The year was 1979.
And so the foundation was laid for John’s illustrious and pace-setting career in finance, brokering deals that no one in Kenya comes close to matching.
“I have had the good fortune of never needing to apply for a job in my life,” says John. “Maybe I came of age at just the right time, when senior officials like the late Mr Gachui were willing to take a chance on unproven youth. That said, I challenge anyone to show I have not given my best in any position I have occupied.”
From that meeting at The Churchill, John has grown to become a colossus straddling the corporate finance field, becoming a key architect of Kenya’s financial markets. He has structured multi-million-dollar deals, helped companies scale, and, in his role as director and chairman of public organisations, saved the country billions of shillings that would have ended up in a rabbit hole, enriching a few at the expense of the many.
And this for a man who did not major in business. He actually studied philosophy, politics, and economics (PPE).
But then, Oxford is not your run-of-the-mill university. It is one of the oldest, and perhaps the most famous university worldwide. Its very name inspires confidence that whoever has traversed its hallowed grounds must of necessity be well-grounded in matters of art, is intellectually astute and has been imbued with the leadership skills necessary to navigate the harsh world out there.
“At Oxford, especially for those reading PPE, there is often the sense that one is being groomed to be a leader. One had the sense, at least in my time, of being at the centre of global events, of watching and being part of thinking and discussions that had real world consequences. These were pivotal years for me. Of course there was also the danger of one acquiring an arrogant sense of entitlement. In fact, for some time, there has been a debate in the UK whether the Oxford PPE undergraduates who dominate high office have been good or bad for the country,” says John.
A good number of British Prime Ministers were moulded in Oxford, among them Boris Johnson, Tony Blair, David Cameron, and Teresa May. Bill Clinton was there too.
Steeped in a culture that many can only dream of, Oxford defined John’s path. And it has nothing to do with the proverbial ladder of success, on which he has scaled the very last rung, but a sense of humanity and achievement that scales such ambitions. “I am not driven by the endless pursuit of riches, but rather, an insatiable appetite to see the African continent rid of the shackles that have stymied its growth and embedded poverty. I would like to see an Africa free from economic hopelessness,” John says.
And he has done his bit in trying to achieve this lofty goal, having raised billions of shillings for various corporates and governments across the region. It is said that a rising tide lifts all boats, and John believes the funding he has helped raise has ultimately touched the lives of millions of people in the region.
One of his most memorable deals was arranging financing for Safaricom, then a new company that had just been spun off from an ailing parastatal. The upstart faced the uphill task of taking on a well-established rival that had entrenched itself in the new niche market of mobile telephony.
Safaricom had been hived off from the Kenya Posts and Telecommunications Company, and had only 16,000 subscribers, while the rival then, Kencell, had about 400,000 subscribers, which, at that time, was thought to mark a plateau for the country’s possible subscriber base. There were whispers that the local market was not yet ready for mobile telephony.
Safaricom was starved of cash and needed funding to scale. John was then at Citibank, and he and his team arranged a Ksh4 billion corporate bond issue on the back of support from OND, the Belgian export credit agency that was backing Siemens, the supplier of the equipment that Safaricom was acquiring to enable it roll out its operations countrywide.
The rest, as they say, is history. Safaricom has become by far the largest company in East and Central Africa, with a market capitalisation that is bigger than the combined market capitalisation of all the other quoted companies at the Nairobi Securities Exchange.
“Safaricom is one of the best known examples of finance serving as a handmaiden to commercial enterprises that then go on to benefit the broader economy,” says John. “I have many such examples. My favourites were arranging annual offshore funding in the early 1980s for Kenya’s coffee farmers before the sale of their produce, and arranging a bond issue for Faulu, which enabled that microfinance to slash its interest rates by almost half, thereby enabling ordinary Kenyans to access interest rates that were previously the preserve of top companies.”
At the tail end of Daniel arap Moi’s Presidency, and during Mwai Kibaki’s Administration, John worked closely with the Central Bank of Kenya to design and popularise listed bonds, which helped the country to fund itself for longer periods and at lower interest rates.
One of his fondest memories is helping design and market the infrastructure bond, which was targeted at financing infrastructure, Thika Highway being the most prominent.
President Uhuru Kenyatta was then Finance Minister, and John remembers with a smile the enormous pressure the future President put on them to come up with imaginative ways to fund government. “He was relentless”!
John also has strong words of praise for Central Bank and Treasury officials. “Amidst the cacophony that is Kenya’s public life, we tend to forget just what smart, committed people we have in government.”
Successful infrastructure projects, John digresses, need to be rolled out on time so that a country can start seeing returns from its investment.
Thika Highway has had enormous socio-economic impact, with land value going up and a housing boom riding on the back of the project. Such projects are essential for the country’s economic well-being but they have their downsides.
“We are very poor at delivering large-scale infrastructure projects on time and on budget.” Anecdotal evidence, John says with a chuckle, suggests that the last large project delivered on time and on budget was KICC in the early seventies.
This is not a phenomenon that’s peculiar to Kenya, however. “I remember reading somewhere – I think it was in a book by the late P.J. O’Rourke – that the last large-scale project that was delivered on time and under budget was the Federal Reserve building in the 1930s!”
The problem, John says, is that such projects in Kenya attract many rent seekers who make money from the variations that are surreptitiously added to the initial contract. Cowboy contractors don’t make money from the contract sum; their bids are normally deliberately low so that they can be assured of clinching the contract. Once the contract is in the bag, the ogre rears its ugly head through numerous fictitious claims, damages, and contract variations. Such projects are designed to fail from the onset.
“We uncorked a genie in the 80s,” says John, when shadowy characters explored ever-more sinister ways of looting public sector projects to accommodate what he refers to as their “Personal Pension Plans”. “Public assets came to be regarded as piggy banks,” he adds.
John got a front-row seat watching the eating frenzy when he was in 2015 unexpectedly appointed Chairman of Kenya Pipeline Company (KPC), one of the richest parastatals in Kenya, given its asset base of over Ksh140 billion.
Before this, John was still stitching deals at Stanbic. He had worked on a facility for KPC for the extension of the pipeline from Nakuru to Eldoret, and as part of a team putting finishing touches to a US$350 million financing for the parastatal’s new Mombasa-Nairobi pipeline. He was therefore reasonably well acquainted with the state corporation.
When he heard of the Presidential appointment, and given the obvious conflict as a result of his banking work with KPC, he had to immediately confront the question of making a choice between his banking career and KPC, the immediacy also being prompted by media having published the news, archive picture included. Having operated at the confluence of government and private sector for years, for him this wasn’t a hard decision. “In any case, I couldn’t very well say no to the challenge the President had presented to me, which basically was ‘stop moaning with everyone else about how poorly state corporations are run. Here’s a chance to do something about it’. How could I possibly decline such a challenge?” The die was cast.
“If KPC was owned by a private equity fund, they would expect no less than a 20 percent return on investment,” says John. “There’s no reason why Kenyans should not demand the same kind of performance.”
But it was not an easy task. “The traditional view of the role of chairmen at state corporations is that it is a sinecure, cutting ribbons, making portentous speeches and such like,” says John with a sardonic smile. But at KPC, he was determined not to play the role of flower girl. He had a tough task at hand and he meant to deliver.
After first carefully studying the lay of the land, he began asking hard questions. The new pipeline that he had helped finance when he was at Stanbic was the lightning rod. It was supposed to have been completed by February 2016; it was now less than four months to the completion date but the pipeline was barely 10 percent done.
The honeymoon was over. It was time to act. Ferocious internal battles ensued over all manner of issues, with the common factors being tenders, procurement, payments, and claims.
Overnight, John found himself a media sensation, and made numerous appearances in Parliament, in addition to being obliged to record statements at the Directorate of Criminal Investigations.
“Being an active chairman of a state corporation is definitely not for those with delicate constitutions,” he says with a laugh. “For five years, I had to brace myself for regular fantastical accusations, for hostile Parliamentary and media questioning. I had to confront bizarre and ever more lurid allegations, including misuse of KPC’s helicopters to ferry exotic beauties for regular trysts at the Coast, or helping Kenyans spirit away Ksh5 trillion, this being alleged at the time of the Panama Papers revelations. One day I will write a best seller!”
But John was not one to be side-tracked by unprofessional bloggers. Under his leadership, the Board re-engineered the company to deliver dividends to the Treasury to the tune of nearly Ksh20 billion by the time he ceased being chairman. Before his time, the parastatal was barely managing to deliver Ksh300 million to Treasury annually.
“Do I regret taking up the Chair position at KPC? No, not at all. I could have done without all the lurid stories, and I really wish that those masters of lies who populate our social media would one day think through what they do; how they destroy people, livelihoods, families. Fortunately for me I could weather the storm, but put yourself in the place of a young lady or gentleman looking to further her/his career, profession or business when prospective employers or financiers google them only to find all manner of nonsense written about them.”
“But to go back to the point: no, I don’t have any regrets about being KPC Chairman. I learnt a great deal about people, about how government works. I learnt that there’s a lot of greed around, but also lots of good, committed people in our state corporations. That over the years, we’ve built potentially world-class firms and institutions, with good people in them, and that if they are given time and space and support, they will ensure this potential becomes real.”
John’s foray into high-octane deal-making started in the early 80s, when he was involved in structuring loans to the Coffee Board of Kenya for on lending to coffee farmers.
“Timely access to affordable finance remains a major headache for farmers. I have no doubt that if we had continued providing this finance, it would have helped slow down the decline of the coffee sector. If we sustain the coffee sector recovery measures that President Kenyatta and CS (Cabinet Secretary) Peter Munya have set in motion, then I am confident finance will once again come to the party. Just look at Ghana, which adopted a variant of the offshore pre-shipment financing we pioneered back in the early 1980s, and now raises over US$ 1 billion annually for cocoa farmers.
The deal-making prepared him for a key professional goal: helping countries like Kenya to access global capital arrest. “After all, I owe the start of my career to Kenya’s first ever foray into the Euro syndicated loan market, so, in a sense, it’s payback time!” he laughs.
Sometime in 2011, John met Uhuru Kenyatta, then Finance Minister at a function, and the two started chatting about the high interest rates prevailing at the time as a result of over-reliance on banks.
John wasn’t surprised. As Finance Minister, Uhuru Kenyatta was constantly speaking to bankers about how to reduce the cost of credit to the state, and to individual Kenyan borrowers. “It’s something I know he cares passionately about, even today,” says John, going on to add that what the then minister wanted when he asked these questions were options to give government leverage when dealing with local investors.
“The world is awash with capital. We just have to figure out how to access it,” John recalls telling the minister.
Kenyatta was intrigued, and asked how much Kenya could raise. John made a few phone calls and a figure of US$300-600 million was floated as an amount the market was comfortable with. The Treasury machinery was put in motion, and, with John conducting the orchestra, the syndicated loan raised US$600 million.
A couple of years later, John was once again at the epicentre of a US$2.8 billion Eurobond that would eventually turn ugly. The initial target was to raise US$1.5 billion, but the market had a healthy appetite and bids closed at US$8.8 billion. Treasury settled for US$2 billion.
“The bond was so successful that a few months down the line, we increased the issue, raised more money, and got better pricing,” says John.
Then politics kicked in. There were allegations that the money was embezzled by the gluttons who hover around Treasury sniffing for dirty deals. John was summoned by the authorities to explain his role in the saga.
The banks’ role was straightforward, he explained to the authorities: Raise funds at the best terms possible, and deposit it in a Kenya Government account at JP Morgan. “We did just that, obtained for Kenya really good terms. I remain proud of having been involved. What happened thereafter was beyond the banks. End of matter.”
At this point, our conversation takes a philosophical turn when John says that powerful people have very few genuine friends, those who will add value and find solutions. Unfortunately, hangers-on, looking for the opportunities that come with proximity to power, are far too many.
“Powerful people can only unload their troubles to only a few people: Their lawyer, doctor, priest or their banker”, being among these. Oftentimes I wonder whether those who want leadership positions, especially in government and politics, understand how lonely it can get up there”.
John finishes with thoughts about how his banking career has evolved. “It’s been quite a ride. Lots of firsts, met many interesting people, many of who have since rocketed to the top of banking and other professions, plenty of interesting deals, and the satisfaction of realising one has been one of the architects of Kenya’s and the region’s financial architecture. Of course I have had my dud deals, hairy moments, including strategic gambles that nearly wiped me out financially. But all in all, one hell of a fun run.”
No wonder he has been referred to as a master financial strategist and dealmaker. Find out more about him from this downloadable PDF.